5 European Oil Shares Worth Considering as Iran Tensions Drive Up Oil Prices

European Oil & Gas Stocks to Watch Amid Rising Geopolitical Risks

Mounting tensions between the United States and Iran have driven oil prices to their highest levels in seven months, as investors brace for potential disruptions ahead of pivotal diplomatic talks. Despite facing stringent Western sanctions, Iran has managed to restore its oil production to nearly pre-sanction volumes by offering discounted crude, with Chinese independent refiners serving as a key outlet for these exports.

Industry experts at FGE NexantECA suggest that if the U.S. were to escalate to military action against Iran, oil prices could surge to $100 per barrel—a jump of nearly 45% from the current Brent benchmark in the low $70s. This environment has propelled European oil and gas stocks to new records, with the STOXX Europe 600 Oil & Gas Index recently reaching an all-time high.

UBS analysts believe that, in the short term, European producers with significant upstream exposure could benefit from the current geopolitical and economic backdrop. Over the longer term, integrated energy majors are seen as attractive investments due to their structural strengths.

Top 5 European Oil & Gas Picks

1. TotalEnergies

   • Market Cap: $168.2B
   • Forward Dividend Yield: 5.06%
   • 52-Week Return: 30.2%

   French energy giant TotalEnergies (NYSE:TTE) is recognized for its robust and reliable dividend, making it a favorite among income-focused investors. UBS highlights the company’s strong cash generation and balanced business model, which positions it to benefit from higher oil prices while maintaining financial resilience. Wall Street analysts also favor TotalEnergies for its well-diversified operations and promising production growth pipeline.

   The company has proposed raising its 2025 dividend to €3.40 per share, a 5.6% increase from 2024, and boosting interim dividends by 7.6% to €0.85 per share, with a payout ratio around 60%. TotalEnergies remains committed to shareholder returns, targeting $2 billion in share buybacks each quarter in 2025—totaling approximately $8 billion for the year, in line with 2024. Looking ahead, the company aims for 5% overall energy growth in 2026, including a 3% rise in oil and gas output and a 25% jump in electricity generation.

2. Eni S.p.A.

   • Market Cap: $67.0B
   • Trailing Dividend Yield: 5.2%
   • 52-Week Return: 51.2%

   Italy’s Eni S.p.A. (NYSE:E) stands out for its disciplined capital allocation and compelling growth outlook. UBS notes that Eni’s upstream assets are highly sensitive to oil price swings, making the company a prime beneficiary if geopolitical risks boost crude prices. Eni is also recognized for its consistent dividend payments, which have significantly enhanced shareholder returns in recent years.

   The company is actively advancing its energy transition strategy, focusing on emissions reduction and maintaining strong cash flows—factors that appeal to ESG-minded investors. While Wall Street appreciates Eni’s diversified portfolio and attractive dividends, the stock currently holds a consensus “Hold” rating, with most analysts recommending to hold, a few suggesting buy, and one advising sell. After reaching 52-week highs, Eni is considered fairly valued or slightly overvalued, trading at a P/E ratio above the industry average.

3. Galp Energia

   • Market Cap: $15.1B
   • Forward Dividend Yield: 3.34%
   • 52-Week Return: 46.9%

   Galp Energia (OTCPK:GLPEF) is Portugal’s leading integrated energy company, formed in 1999 through the merger of several entities, including the former national oil and gas companies. UBS recently upgraded Galp to a “Buy” rating with a €20 price target, citing strong growth prospects from the major Mopane oil and gas discovery in Namibia, rising production in Brazil, and improved performance in downstream and LNG segments.

   The Mopane find, announced in early 2024, is estimated to contain over 10 billion barrels of oil equivalent, potentially transforming Namibia into a significant African oil producer. UBS sees Galp as undervalued, forecasting a 14% annual production growth rate through 2027, driven by the Mopane and Bacalhau projects. Analyst estimates for Galp’s earnings per share have been raised by an average of 16% for 2025–2027, supported by higher LNG volumes and strong refining margins.

4. Saipem

   • Market Cap: $168.2B
   • Estimated Dividend Yield: 6.3%
   • 52-Week Return: 61.3%

   Saipem S.p.A. (OTCPK:SAPMF), another major Italian energy player, specializes in energy and infrastructure solutions worldwide. UBS rates Saipem a Buy, emphasizing the company’s turnaround potential, which the market may be underestimating. Analysts expect Saipem’s EBITDA margins to return to pre-pandemic levels by 2028, with margins already doubling over the past four years. The company’s record-high backlog provides strong visibility for revenue and earnings over the next 12 to 18 months.

   Saipem is also pursuing inorganic growth, with a planned merger with Subsea7 (OTCPK:SUBCY) set to create a global leader in subsea installation and SURF (Subsea Umbilicals, Risers, and Flowlines) segments. The merger is expected to finalize in the second half of 2026. Saipem has also improved its financial position by significantly reducing net debt and is on track to achieve an investment-grade credit rating.

5. OMV

   • Market Cap: $21.3B
   • Forward Dividend Yield: 5.0%
   • 52-Week Return: 42.2%

   OMV AG (OTCPK:OMVJF), based in Vienna and partially owned by the Austrian government, is a diversified oil and gas company with operations spanning upstream, downstream, and chemicals. This integrated structure helps shield OMV from energy market volatility. The company is also expanding into petrochemicals, renewables, and recycling. UBS rates OMV a Buy for its combination of upstream leverage and chemicals exposure, as well as its attractive cash flow yield.

   OMV has a strong track record of increasing its regular dividend since 2015 and aims to continue this progressive policy, with the possibility of additional variable dividends. For fiscal year 2025, OMV has proposed a regular dividend of EUR 3.15 per share plus a variable dividend of EUR 1.25 per share. Starting in 2026 (payable in 2027), OMV will update its dividend policy to include 50% of dividends from Borouge Group International (BGI) and 20–30% of operating cash flow, excluding BGI dividends.

By Alex Kimani for Oilprice.com

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